As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Tuesday, June 30, 2009

The Ever-Circling Trigger

Olympia Snowe, one of the few Republicans who may support a health care overhaul, has returned to the concept of a "trigger" for the public option, delaying its implementation and allowing the insurance industry an effective monopoly.

Sen. Olympia Snowe, a key figure in shaping federal health care legislation, said Monday that a government-run plan that would take effect if the private insurance market fails to deliver affordable coverage could bridge the partisan divide that threatens to derail President Barack Obama's efforts to reform the system.

Snowe, R-Maine, said she's working with Sen. Chuck Schumer, D-N.Y., to establish that kind of a framework in the bill expected to emerge next month from the Senate Finance Committee.

In an Associated Press interview in Portland, Snowe said it would be unfair to include a government-run health insurance option that would take effect immediately.

"If you establish a public option at the forefront that goes head-to-head and competes with the private health insurance market ... the public option will have significant price advantages," she said.

Responding to Snowe's comments, Schumer spokesman Brian Fallon said the Democrat will continue to seek a consensus with Republicans but believes there must be a public option that "is available to all Americans from the first day."

Schumer will talk with anyone, but his principle of a public option on day one is completely at odds with Snowe's concept. By the way, Schumer's vision of a public option, which apparently appears in the Senate HELP Committee's draft legislation, isn't good enough. It's the "level-playing-field" option that forsakes Medicare bargaining rates for a public insurance plan, turning it into a weak non-profit that won't drastically impact the marketplace.

But Snowe's concept, which would undoubtedly set an unrealizable standard to prevent the public option from ever coming into existence - that's how it works with Medicare Part D, which has a trigger as well - is a complete non-starter. And keep in mind, EJ Dionne informed us yesterday that the main GOP negotiator in the Senate, Chuck Grassley, will not sign onto a deal if only Snowe supports it, which means it would have to move to the RIGHT of Snowe's concept. And those Republicans are out there today demonizing the public plan as a "Washington takeover".

Fortunately, Democrats have been warning the GOP that they're willing to go it alone on health care if they remain unhelpful, using budget reconciliation requiring only 50 votes. There's still hope that the debate over the public option and health care reform generally will remain internally focused. But seeing Snowe step out on the trigger is worrying.

Meanwhile, consistent with my belief that more than the public option matters in this debate, here's Ezra Klein on health insurance exchanges, a concept that would add competition to every health care marketplace. Any public option would live in here, but it would also break the mini-monopolies in various regions, by offering an exchange that would allow consumers to choose from a variety of policies. The idea is to create a true insurance marketplace. However, if a national exchange gets whittled down to a state-based one, then it's effectively no different than current rules for the individual insurance market.

The strong version is national, or at least regional. It's open to everyone: The unemployed, the self-employed, and any business, no matter the size, that wants to buy its workers in. There's risk adjustment to reduce the incentive for cherrypicking. And all this means that each exchange has many tens of millions of people, giving it tremendous advantages in scale, simplicity and standardization. With tens of millions of potential customers, insurers are eager to participate, and they will bid aggressively to ensure they're included in the market and compete aggressively to make sure they're successful within it. Over time, the combination of increased efficiencies and greater competition drive down costs in the exchange, which will lead more employers to use it, which will in turn give it more scale and bargaining power.

The weak version is state-based. It's open to only the unemployed, the self-employed and small businesses. Risk-adjustment, if it exists at all, is crude. With such a limited pool of applicants, insurers aren't driven to compete, and the efficiencies of scale and competition are minimal. It never really grows, and instead exists as a marginal policy to mop up those who aren't covered by employers.